Amended IN Assembly April 22, 2025 Amended IN Assembly March 12, 2025 CALIFORNIA LEGISLATURE 20252026 REGULAR SESSION Assembly Bill No. 745Introduced by Assembly Member IrwinFebruary 18, 2025 An act to amend Section 94520 of the Public Resources Code, and to add Section 761.7 to Article 6.5 (commencing with Section 860) to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, relating to electricity. LEGISLATIVE COUNSEL'S DIGESTAB 745, as amended, Irwin. Electricity: transmission projects: review and approval. clean energy transmission projects: utility infrastructure undergrounding: financing.The Public Utilities Act, except as provided, prohibits an electrical corporation from beginning construction of a line, plant, or system, or of any extension of the line, plant, or system, without having first obtained from the Public Utilities Commission a certificate that the present or future public convenience and necessity require or will require its construction. The act specifies that a certificate is not required for the extension, expansion, upgrade, or other modification of an existing electrical transmission facility, including transmission lines and substations.Under its existing regulatory authority over electrical corporations, the commission has adopted a resolution establishing the Transmission Review Process to review electrical corporations capital transmission projects beginning January 1, 2024.This bill would, consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, require the commission to review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.The Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024 (act), approved by the voters as Proposition 4 at the November 5, 2024, statewide general election, authorized the issuance of bonds in the amount of $10,000,000,000 pursuant to the State General Obligation Bond Law to finance projects for safe drinking water, drought, flood, and water resilience, wildfire and forest resilience, coastal resilience, extreme heat mitigation, biodiversity and nature-based climate solutions, climate-smart, sustainable, and resilient farms, ranches, and working lands, park creation and outdoor access, and clean air programs.The act makes $850,000,000 available, upon appropriation by the Legislature, for clean energy projects. Of these funds, the act makes $325,000,000 available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects, as provided. Existing law authorizes preference to be given to projects that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, as provided.This bill would authorize an appropriation by the Legislature of funds not provided for by the act to be made and allocated to the entity chosen by the Legislature, as described above, to further facilitate the public financing of clean energy transmission projects.Existing law vests the Public Utilities Commission (PUC) with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the PUC, under specific circumstances, and upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.This bill would authorize the PUC, upon application by an electrical corporation to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure, or in a proceeding to recover costs and expenses in rates related to the undergrounding of utility infrastructure, and if the commission finds some or all of the costs and expenses to be reasonable, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, related to the undergrounding of utility infrastructure, as provided.This bill would prohibit the commission from allowing a large electrical corporation, as defined, to include in its equity rate base infrastructure undergrounding amounts, as defined.Under existing law, a violation of the act, or of an order, decision, rule, direction, demand, or requirement of the commission is a crime.Because the certain provisions of this bill would be part of the act, and a violation of a commission action implementing its requirements would be a crime, the bill would impose a state-mandated local program.The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.This bill would provide that no reimbursement is required by this act for a specified reason.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 94520 of the Public Resources Code is amended to read:94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.SEC. 2. Article 6.5 (commencing with Section 860) is added to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to read: Article 6.5. Financing for Undergrounding of Utility Infrastructure860. (a) This article applies in either of the following circumstances:(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.(b) For purposes of this article, the following definitions apply:(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:(A) Principal, interest, and redemption premiums that are payable on recovery bonds.(B) A payment required under an ancillary agreement.(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.(F) Other costs as specifically authorized by a financing order.(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:(A) Recovery costs specified in the financing order.(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.(10) Recovery costs means any of the following:(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).(C) Financing costs.(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term. 860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:(I) They are just and reasonable.(II) They are consistent with the public interest.(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division. 860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.(2) Value has been given by the pledgees of the recovery property.(3) The pledgor has signed a security agreement covering the recovery property.(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:(1) Commingling of fixed recovery charge revenues with other amounts.(2) The retention by the seller of either of the following:(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.(3) Any recourse that the purchaser may have against the seller.(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.860.8. This article shall not affect any civil action or proceeding.860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.SECTION 1.This act shall be known, and may be cited, as the Consumer Utility Bill of Rights.SEC. 2.The Legislature finds and declares all of the following:(a)In 2024, at $186, the average utility bill in California is nearly 30 percent higher than the average utility bill in the United States.(b)Californians living in single-family homes have monthly utility bills that range from $152 to $415, inclusive, per month, depending on the electrical corporation providing service to them.(c)According to the Public Advocates Office of the Public Utilities Commission, in 2024, nearly one in five households were behind on their utility bills.(d)The average utility rate has increased substantially, an average of 40 percent over three years. In two of the three large electrical corporations service territories, the increase was 51 percent over the three-year period.(e)According to the Public Advocates Office of the Public Utilities Commission, the top two direct contributors to the increase were wildfire mitigation and transmission and distribution investments.(f)The 2024 calendar year marks the highest recorded residential consumer rates for two of the three large electrical corporations.(g)The rate increases by the three large electrical corporations have exceeded the increases in inflation by at least 60 percent and by as much as 130 percent.(h)Across the three large electrical corporations, transmission and distribution costs increased by 27 percent from 2021 to 2022, and 7.3 percent from 2022 to 2023.(i)In one large electrical corporations service territory, the transmission and distribution investment costs compose 44 percent of the customer bill, according to the large electrical corporations own internet website. Only the costs of energy supply, at 50 percent of the bill, exceeded this expense to customers.(j)According to the Public Utilities Commission, over 64 percent of the transmission and distribution expenditures, accounting for $4,400,000,000, expended by the large electrical corporations between 2020 and 2022 are self-approved and have not been formally reviewed for cost or need by the commission, the Independent System Operator, or a third party during the projects planning and approval.(k)The average commission-regulated return on equity across all electrical corporations amounts to 10.23 percent. This amounts to a commission-sanctioned profit of 10.23 percent annually. By comparison, the Consumer Price Index, which reflects the increase in consumer costs for all goods, in 2024 was 2.7 percent.SEC. 3.Section 761.7 is added to the Public Utilities Code, to read:761.7.Consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, the commission shall review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing electrical transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
Amended IN Assembly April 22, 2025 Amended IN Assembly March 12, 2025 CALIFORNIA LEGISLATURE 20252026 REGULAR SESSION Assembly Bill No. 745Introduced by Assembly Member IrwinFebruary 18, 2025 An act to amend Section 94520 of the Public Resources Code, and to add Section 761.7 to Article 6.5 (commencing with Section 860) to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, relating to electricity. LEGISLATIVE COUNSEL'S DIGESTAB 745, as amended, Irwin. Electricity: transmission projects: review and approval. clean energy transmission projects: utility infrastructure undergrounding: financing.The Public Utilities Act, except as provided, prohibits an electrical corporation from beginning construction of a line, plant, or system, or of any extension of the line, plant, or system, without having first obtained from the Public Utilities Commission a certificate that the present or future public convenience and necessity require or will require its construction. The act specifies that a certificate is not required for the extension, expansion, upgrade, or other modification of an existing electrical transmission facility, including transmission lines and substations.Under its existing regulatory authority over electrical corporations, the commission has adopted a resolution establishing the Transmission Review Process to review electrical corporations capital transmission projects beginning January 1, 2024.This bill would, consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, require the commission to review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.The Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024 (act), approved by the voters as Proposition 4 at the November 5, 2024, statewide general election, authorized the issuance of bonds in the amount of $10,000,000,000 pursuant to the State General Obligation Bond Law to finance projects for safe drinking water, drought, flood, and water resilience, wildfire and forest resilience, coastal resilience, extreme heat mitigation, biodiversity and nature-based climate solutions, climate-smart, sustainable, and resilient farms, ranches, and working lands, park creation and outdoor access, and clean air programs.The act makes $850,000,000 available, upon appropriation by the Legislature, for clean energy projects. Of these funds, the act makes $325,000,000 available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects, as provided. Existing law authorizes preference to be given to projects that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, as provided.This bill would authorize an appropriation by the Legislature of funds not provided for by the act to be made and allocated to the entity chosen by the Legislature, as described above, to further facilitate the public financing of clean energy transmission projects.Existing law vests the Public Utilities Commission (PUC) with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the PUC, under specific circumstances, and upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.This bill would authorize the PUC, upon application by an electrical corporation to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure, or in a proceeding to recover costs and expenses in rates related to the undergrounding of utility infrastructure, and if the commission finds some or all of the costs and expenses to be reasonable, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, related to the undergrounding of utility infrastructure, as provided.This bill would prohibit the commission from allowing a large electrical corporation, as defined, to include in its equity rate base infrastructure undergrounding amounts, as defined.Under existing law, a violation of the act, or of an order, decision, rule, direction, demand, or requirement of the commission is a crime.Because the certain provisions of this bill would be part of the act, and a violation of a commission action implementing its requirements would be a crime, the bill would impose a state-mandated local program.The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.This bill would provide that no reimbursement is required by this act for a specified reason.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES
Amended IN Assembly April 22, 2025 Amended IN Assembly March 12, 2025
Amended IN Assembly April 22, 2025
Amended IN Assembly March 12, 2025
CALIFORNIA LEGISLATURE 20252026 REGULAR SESSION
Assembly Bill
No. 745
Introduced by Assembly Member IrwinFebruary 18, 2025
Introduced by Assembly Member Irwin
February 18, 2025
An act to amend Section 94520 of the Public Resources Code, and to add Section 761.7 to Article 6.5 (commencing with Section 860) to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, relating to electricity.
LEGISLATIVE COUNSEL'S DIGEST
## LEGISLATIVE COUNSEL'S DIGEST
AB 745, as amended, Irwin. Electricity: transmission projects: review and approval. clean energy transmission projects: utility infrastructure undergrounding: financing.
The Public Utilities Act, except as provided, prohibits an electrical corporation from beginning construction of a line, plant, or system, or of any extension of the line, plant, or system, without having first obtained from the Public Utilities Commission a certificate that the present or future public convenience and necessity require or will require its construction. The act specifies that a certificate is not required for the extension, expansion, upgrade, or other modification of an existing electrical transmission facility, including transmission lines and substations.Under its existing regulatory authority over electrical corporations, the commission has adopted a resolution establishing the Transmission Review Process to review electrical corporations capital transmission projects beginning January 1, 2024.This bill would, consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, require the commission to review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.The Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024 (act), approved by the voters as Proposition 4 at the November 5, 2024, statewide general election, authorized the issuance of bonds in the amount of $10,000,000,000 pursuant to the State General Obligation Bond Law to finance projects for safe drinking water, drought, flood, and water resilience, wildfire and forest resilience, coastal resilience, extreme heat mitigation, biodiversity and nature-based climate solutions, climate-smart, sustainable, and resilient farms, ranches, and working lands, park creation and outdoor access, and clean air programs.The act makes $850,000,000 available, upon appropriation by the Legislature, for clean energy projects. Of these funds, the act makes $325,000,000 available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects, as provided. Existing law authorizes preference to be given to projects that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, as provided.This bill would authorize an appropriation by the Legislature of funds not provided for by the act to be made and allocated to the entity chosen by the Legislature, as described above, to further facilitate the public financing of clean energy transmission projects.Existing law vests the Public Utilities Commission (PUC) with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the PUC, under specific circumstances, and upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.This bill would authorize the PUC, upon application by an electrical corporation to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure, or in a proceeding to recover costs and expenses in rates related to the undergrounding of utility infrastructure, and if the commission finds some or all of the costs and expenses to be reasonable, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, related to the undergrounding of utility infrastructure, as provided.This bill would prohibit the commission from allowing a large electrical corporation, as defined, to include in its equity rate base infrastructure undergrounding amounts, as defined.Under existing law, a violation of the act, or of an order, decision, rule, direction, demand, or requirement of the commission is a crime.Because the certain provisions of this bill would be part of the act, and a violation of a commission action implementing its requirements would be a crime, the bill would impose a state-mandated local program.The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.This bill would provide that no reimbursement is required by this act for a specified reason.
The Public Utilities Act, except as provided, prohibits an electrical corporation from beginning construction of a line, plant, or system, or of any extension of the line, plant, or system, without having first obtained from the Public Utilities Commission a certificate that the present or future public convenience and necessity require or will require its construction. The act specifies that a certificate is not required for the extension, expansion, upgrade, or other modification of an existing electrical transmission facility, including transmission lines and substations.
Under its existing regulatory authority over electrical corporations, the commission has adopted a resolution establishing the Transmission Review Process to review electrical corporations capital transmission projects beginning January 1, 2024.
This bill would, consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, require the commission to review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.
The Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024 (act), approved by the voters as Proposition 4 at the November 5, 2024, statewide general election, authorized the issuance of bonds in the amount of $10,000,000,000 pursuant to the State General Obligation Bond Law to finance projects for safe drinking water, drought, flood, and water resilience, wildfire and forest resilience, coastal resilience, extreme heat mitigation, biodiversity and nature-based climate solutions, climate-smart, sustainable, and resilient farms, ranches, and working lands, park creation and outdoor access, and clean air programs.
The act makes $850,000,000 available, upon appropriation by the Legislature, for clean energy projects. Of these funds, the act makes $325,000,000 available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects, as provided. Existing law authorizes preference to be given to projects that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, as provided.
This bill would authorize an appropriation by the Legislature of funds not provided for by the act to be made and allocated to the entity chosen by the Legislature, as described above, to further facilitate the public financing of clean energy transmission projects.
Existing law vests the Public Utilities Commission (PUC) with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the PUC, under specific circumstances, and upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.
This bill would authorize the PUC, upon application by an electrical corporation to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure, or in a proceeding to recover costs and expenses in rates related to the undergrounding of utility infrastructure, and if the commission finds some or all of the costs and expenses to be reasonable, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, related to the undergrounding of utility infrastructure, as provided.
This bill would prohibit the commission from allowing a large electrical corporation, as defined, to include in its equity rate base infrastructure undergrounding amounts, as defined.
Under existing law, a violation of the act, or of an order, decision, rule, direction, demand, or requirement of the commission is a crime.
Because the certain provisions of this bill would be part of the act, and a violation of a commission action implementing its requirements would be a crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
## Digest Key
## Bill Text
The people of the State of California do enact as follows:SECTION 1. Section 94520 of the Public Resources Code is amended to read:94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.SEC. 2. Article 6.5 (commencing with Section 860) is added to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to read: Article 6.5. Financing for Undergrounding of Utility Infrastructure860. (a) This article applies in either of the following circumstances:(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.(b) For purposes of this article, the following definitions apply:(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:(A) Principal, interest, and redemption premiums that are payable on recovery bonds.(B) A payment required under an ancillary agreement.(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.(F) Other costs as specifically authorized by a financing order.(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:(A) Recovery costs specified in the financing order.(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.(10) Recovery costs means any of the following:(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).(C) Financing costs.(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term. 860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:(I) They are just and reasonable.(II) They are consistent with the public interest.(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division. 860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.(2) Value has been given by the pledgees of the recovery property.(3) The pledgor has signed a security agreement covering the recovery property.(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:(1) Commingling of fixed recovery charge revenues with other amounts.(2) The retention by the seller of either of the following:(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.(3) Any recourse that the purchaser may have against the seller.(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.860.8. This article shall not affect any civil action or proceeding.860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.SECTION 1.This act shall be known, and may be cited, as the Consumer Utility Bill of Rights.SEC. 2.The Legislature finds and declares all of the following:(a)In 2024, at $186, the average utility bill in California is nearly 30 percent higher than the average utility bill in the United States.(b)Californians living in single-family homes have monthly utility bills that range from $152 to $415, inclusive, per month, depending on the electrical corporation providing service to them.(c)According to the Public Advocates Office of the Public Utilities Commission, in 2024, nearly one in five households were behind on their utility bills.(d)The average utility rate has increased substantially, an average of 40 percent over three years. In two of the three large electrical corporations service territories, the increase was 51 percent over the three-year period.(e)According to the Public Advocates Office of the Public Utilities Commission, the top two direct contributors to the increase were wildfire mitigation and transmission and distribution investments.(f)The 2024 calendar year marks the highest recorded residential consumer rates for two of the three large electrical corporations.(g)The rate increases by the three large electrical corporations have exceeded the increases in inflation by at least 60 percent and by as much as 130 percent.(h)Across the three large electrical corporations, transmission and distribution costs increased by 27 percent from 2021 to 2022, and 7.3 percent from 2022 to 2023.(i)In one large electrical corporations service territory, the transmission and distribution investment costs compose 44 percent of the customer bill, according to the large electrical corporations own internet website. Only the costs of energy supply, at 50 percent of the bill, exceeded this expense to customers.(j)According to the Public Utilities Commission, over 64 percent of the transmission and distribution expenditures, accounting for $4,400,000,000, expended by the large electrical corporations between 2020 and 2022 are self-approved and have not been formally reviewed for cost or need by the commission, the Independent System Operator, or a third party during the projects planning and approval.(k)The average commission-regulated return on equity across all electrical corporations amounts to 10.23 percent. This amounts to a commission-sanctioned profit of 10.23 percent annually. By comparison, the Consumer Price Index, which reflects the increase in consumer costs for all goods, in 2024 was 2.7 percent.SEC. 3.Section 761.7 is added to the Public Utilities Code, to read:761.7.Consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, the commission shall review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing electrical transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
The people of the State of California do enact as follows:
## The people of the State of California do enact as follows:
SECTION 1. Section 94520 of the Public Resources Code is amended to read:94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.
SECTION 1. Section 94520 of the Public Resources Code is amended to read:
### SECTION 1.
94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.
94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.
94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.
94520. (a) Of the funds made available by Section 94500, three hundred twenty-five million dollars ($325,000,000) shall be available, upon appropriation by the Legislature, to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or any other entity chosen by the Legislature, upon appropriation by the Legislature, for the public financing of clean energy transmission projects that are necessary to meet the states clean energy goals to reduce or offset ratepayer costs associated with the public benefits of transmission projects.
###### 94520.
(b) Preference may be given to projects under this section that provide multiple benefits, including, but not limited to, reducing the risk of wildfire, reducing reliance on fossil fuel plants in disadvantaged communities, and reducing rate pressure, including reconductoring and other grid-enhancing technologies.
(c) An appropriation by the Legislature of funds not provided for by this division may be made and allocated to the entity chosen by the Legislature pursuant to subdivision (a) to further facilitate the public financing of clean energy transmission projects.
SEC. 2. Article 6.5 (commencing with Section 860) is added to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to read: Article 6.5. Financing for Undergrounding of Utility Infrastructure860. (a) This article applies in either of the following circumstances:(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.(b) For purposes of this article, the following definitions apply:(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:(A) Principal, interest, and redemption premiums that are payable on recovery bonds.(B) A payment required under an ancillary agreement.(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.(F) Other costs as specifically authorized by a financing order.(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:(A) Recovery costs specified in the financing order.(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.(10) Recovery costs means any of the following:(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).(C) Financing costs.(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term. 860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:(I) They are just and reasonable.(II) They are consistent with the public interest.(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division. 860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.(2) Value has been given by the pledgees of the recovery property.(3) The pledgor has signed a security agreement covering the recovery property.(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:(1) Commingling of fixed recovery charge revenues with other amounts.(2) The retention by the seller of either of the following:(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.(3) Any recourse that the purchaser may have against the seller.(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.860.8. This article shall not affect any civil action or proceeding.860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.
SEC. 2. Article 6.5 (commencing with Section 860) is added to Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to read:
### SEC. 2.
Article 6.5. Financing for Undergrounding of Utility Infrastructure860. (a) This article applies in either of the following circumstances:(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.(b) For purposes of this article, the following definitions apply:(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:(A) Principal, interest, and redemption premiums that are payable on recovery bonds.(B) A payment required under an ancillary agreement.(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.(F) Other costs as specifically authorized by a financing order.(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:(A) Recovery costs specified in the financing order.(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.(10) Recovery costs means any of the following:(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).(C) Financing costs.(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term. 860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:(I) They are just and reasonable.(II) They are consistent with the public interest.(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division. 860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.(2) Value has been given by the pledgees of the recovery property.(3) The pledgor has signed a security agreement covering the recovery property.(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:(1) Commingling of fixed recovery charge revenues with other amounts.(2) The retention by the seller of either of the following:(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.(3) Any recourse that the purchaser may have against the seller.(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.860.8. This article shall not affect any civil action or proceeding.860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.
Article 6.5. Financing for Undergrounding of Utility Infrastructure860. (a) This article applies in either of the following circumstances:(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.(b) For purposes of this article, the following definitions apply:(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:(A) Principal, interest, and redemption premiums that are payable on recovery bonds.(B) A payment required under an ancillary agreement.(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.(F) Other costs as specifically authorized by a financing order.(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:(A) Recovery costs specified in the financing order.(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.(10) Recovery costs means any of the following:(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).(C) Financing costs.(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term. 860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:(I) They are just and reasonable.(II) They are consistent with the public interest.(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division. 860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.(2) Value has been given by the pledgees of the recovery property.(3) The pledgor has signed a security agreement covering the recovery property.(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:(1) Commingling of fixed recovery charge revenues with other amounts.(2) The retention by the seller of either of the following:(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.(3) Any recourse that the purchaser may have against the seller.(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.860.8. This article shall not affect any civil action or proceeding.860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.
Article 6.5. Financing for Undergrounding of Utility Infrastructure
Article 6.5. Financing for Undergrounding of Utility Infrastructure
##### Article 6.5. Financing for Undergrounding of Utility Infrastructure
860. (a) This article applies in either of the following circumstances:(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.(b) For purposes of this article, the following definitions apply:(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:(A) Principal, interest, and redemption premiums that are payable on recovery bonds.(B) A payment required under an ancillary agreement.(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.(F) Other costs as specifically authorized by a financing order.(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:(A) Recovery costs specified in the financing order.(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.(10) Recovery costs means any of the following:(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).(C) Financing costs.(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term.
860. (a) This article applies in either of the following circumstances:
###### 860.
(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to the undergrounding of utility infrastructure and the commission finds some or all of the costs and expenses to be just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.
(2) If an electrical corporation submits an application for recovery of costs and expenses related to the undergrounding of utility infrastructure in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporations application are just and reasonable, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.
(b) For purposes of this article, the following definitions apply:
(1) Ancillary agreement means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.
(2) Consumer means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.
(3) Financing costs means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. Financing costs may include any of the following:
(A) Principal, interest, and redemption premiums that are payable on recovery bonds.
(B) A payment required under an ancillary agreement.
(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.
(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.
(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.
(F) Other costs as specifically authorized by a financing order.
(4) Financing entity means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.
(5) Financing order means an order of the commission adopted in accordance with this article that includes, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.
(6) Fixed recovery charges means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:
(A) Recovery costs specified in the financing order.
(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.
(7) Fixed recovery tax amounts means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.
(8) Infrastructure undergrounding amounts means the portion of costs and expenses the commission finds to be just and reasonable.
(9) Recovery bonds means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.
(10) Recovery costs means any of the following:
(A) Infrastructure undergrounding amounts or costs pursuant to subdivision (a) authorized by the commission in a financing order for recovery.
(B) Federal and state income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A).
(C) Financing costs.
(D) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.
(11) (A) Recovery property means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:
(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 860.1 and the financing order.
(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.
(B) Recovery property shall not include a right to be paid fixed recovery tax amounts.
(C) Recovery property shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.
(12) Service territory means the geographical area that the electrical corporation provides with electric distribution service.
(13) True-up adjustment means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term.
860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:(I) They are just and reasonable.(II) They are consistent with the public interest.(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division.
860.1. (a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporations federal and state income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.
###### 860.1.
(1) (A) Following application by an electrical corporation, the commission shall issue a financing order if the commission determines that the following conditions are satisfied:
(i) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable.
(ii) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:
(I) They are just and reasonable.
(II) They are consistent with the public interest.
(III) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporations service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporations corporate debt and equity in the ratio approved by the commission at the time of the financing order.
(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding, or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The electrical corporation may submit an application with respect to recovery costs that an electrical corporation has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.
(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.
(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumers nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumers failure to pay any other charge payable to that electrical corporation.
(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery charges and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (g).
(c) Recovery bonds authorized by the commissions financing orders may be issued in one or more series on or before December 31, 2035.
(d) The commission shall issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical corporations written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between fixed recovery charges, any associated fixed recovery tax amounts, and other charges.
(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (g), the fixed recovery charges, any associated fixed recovery tax amounts, recovery property, financing orders, or any rights under a financing order until the recovery bonds, together with the interest on the recovery bonds and associated financing costs, are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds, provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the electrical corporation and of owners and holders of the recovery bonds. The financing entity may include this pledge and undertaking for the state in these recovery bonds. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:
(1) Any collection of fixed recovery charges in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.
(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and state income and franchise taxes associated with fixed recovery charges, provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:
(A) Treating the recovery bonds as debt of the electrical corporation or its affiliates for federal income tax purposes.
(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.
(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. All recovery bonds shall contain on the face thereof a statement to the following effect: Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.
(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.
(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.
(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property accorded by this article shall continuously exist for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds.
(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.
(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.
(k) This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division.
860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.
860.2. (a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.
###### 860.2.
(b) The electrical corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in a financing order. The electrical corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 860.3. In addition, recovery property may be sold or assigned by either of the following: (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this article.
(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery charges for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of electric service are provided to a consumer by any person or entity other than the electrical corporation in whose service territory the consumer is located, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electrical corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.
(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the electrical corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.
(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.
(f) Notwithstanding Section 1708 or any other law, any requirement under this article or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order. The approval by the commission in a financing order of the issuance by the electrical corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 861 does not apply to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.
860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.(2) Value has been given by the pledgees of the recovery property.(3) The pledgor has signed a security agreement covering the recovery property.(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.
860.3. (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:
###### 860.3.
(1) The commission has issued a financing order authorizing the fixed recovery charges included in the recovery property.
(2) Value has been given by the pledgees of the recovery property.
(3) The pledgor has signed a security agreement covering the recovery property.
(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as debtor and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.
(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.
(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the recovery property with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which recovery property revenues have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement, or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.
(e) If default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 860.4, of the recovery property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.
(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity. Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the electrical corporation, an affiliate of the electrical corporation, or a financing entity.
(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the electrical corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be protective filings and are not evidence of the ownership of the recovery property.
(2) A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property revenues and proceeds, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property revenues and proceeds have accrued.
(3) In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of recovery property revenues, the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of recovery property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.
860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:(1) Commingling of fixed recovery charge revenues with other amounts.(2) The retention by the seller of either of the following:(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.(3) Any recourse that the purchaser may have against the seller.(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.
860.4. (a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical corporation or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferors right, title, and interest, as in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.
###### 860.4.
(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:
(1) Commingling of fixed recovery charge revenues with other amounts.
(2) The retention by the seller of either of the following:
(A) A partial or residual interest, including an equity interest, in the financing entity or the recovery property, whether direct or indirect, subordinate or otherwise.
(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.
(3) Any recourse that the purchaser may have against the seller.
(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.
(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.
(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.
(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.
(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:
(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.
(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.
(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.
860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.
860.5. Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.
###### 860.5.
860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.
860.6. The authority of the commission to issue financing orders pursuant to Section 860.1 shall expire on December 31, 2035. The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the electrical corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.
###### 860.6.
860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.
860.7. (a) Notwithstanding subdivision (e) of Section 860.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with infrastructure undergrounding amounts included in the recovery costs addressed in that financing order, the electrical corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the infrastructure undergrounding amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.
###### 860.7.
(b) This section shall not permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.
860.8. This article shall not affect any civil action or proceeding.
860.8. This article shall not affect any civil action or proceeding.
###### 860.8.
860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.
860.9. The commission shall not allow a large electrical corporation, as defined in Section 3280, to include in its equity rate base infrastructure undergrounding amounts. A large electrical corporations infrastructure undergrounding amounts and the debt financing costs of those amounts may be financed through a financing order pursuant to Section 860.1 subject to the requirements of that financing order.
###### 860.9.
SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
### SEC. 3.
This act shall be known, and may be cited, as the Consumer Utility Bill of Rights.
The Legislature finds and declares all of the following:
(a)In 2024, at $186, the average utility bill in California is nearly 30 percent higher than the average utility bill in the United States.
(b)Californians living in single-family homes have monthly utility bills that range from $152 to $415, inclusive, per month, depending on the electrical corporation providing service to them.
(c)According to the Public Advocates Office of the Public Utilities Commission, in 2024, nearly one in five households were behind on their utility bills.
(d)The average utility rate has increased substantially, an average of 40 percent over three years. In two of the three large electrical corporations service territories, the increase was 51 percent over the three-year period.
(e)According to the Public Advocates Office of the Public Utilities Commission, the top two direct contributors to the increase were wildfire mitigation and transmission and distribution investments.
(f)The 2024 calendar year marks the highest recorded residential consumer rates for two of the three large electrical corporations.
(g)The rate increases by the three large electrical corporations have exceeded the increases in inflation by at least 60 percent and by as much as 130 percent.
(h)Across the three large electrical corporations, transmission and distribution costs increased by 27 percent from 2021 to 2022, and 7.3 percent from 2022 to 2023.
(i)In one large electrical corporations service territory, the transmission and distribution investment costs compose 44 percent of the customer bill, according to the large electrical corporations own internet website. Only the costs of energy supply, at 50 percent of the bill, exceeded this expense to customers.
(j)According to the Public Utilities Commission, over 64 percent of the transmission and distribution expenditures, accounting for $4,400,000,000, expended by the large electrical corporations between 2020 and 2022 are self-approved and have not been formally reviewed for cost or need by the commission, the Independent System Operator, or a third party during the projects planning and approval.
(k)The average commission-regulated return on equity across all electrical corporations amounts to 10.23 percent. This amounts to a commission-sanctioned profit of 10.23 percent annually. By comparison, the Consumer Price Index, which reflects the increase in consumer costs for all goods, in 2024 was 2.7 percent.
Consistent with the commissions authority to review and approve new transmission line projects undertaken pursuant to the Independent System Operator planning process, the commission shall review and approve or deny transmission line projects, including the extension, expansion, upgrade, or other modification of existing electrical transmission lines, initiated by an electrical corporation based on the appropriateness and cost effectiveness of the projects.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.